Colliers Predicts Hong Kong Property Market Recovery Led by Retail as China Reopens

According to property consultancy Colliers Hong Kong, the reopening of China and the easing of Covid rules will lead to a recovery of Hong Kong's property market in 2023.
Hannah Jeong, head of valuation and advisory services at Colliers, told CNBC's "Squawk Box Asia" on Thursday that the retail market will reap the best benefit from the current situation. She noted that retail businesses are well-positioned to take advantage of the current environment.
Colliers International has warned that there are still some potential headwinds facing Hong Kong this year which could undercut its recovery. These include continued geopolitical tension and the possibility of a global recession.
"We are more cautiously optimistic for 2023," Jeong added.
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There are many uncertainties that can impact the property market, but one of the positive factors is the opening of borders. This can provide a boost for many other sectors within the market.
Colliers predicts that the retail sector will be the first to recover from the Covid pandemic, with both rents and prices rising by 2023. This is especially true for high street shops, which are expected to see the biggest increases.
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Jeong said that the retail rental market is expected to see an 8% increase in the coming year. This is good news for landlords and tenants alike, as it indicates a healthy and growing market.
She said that although this is still lower than pre-Covid levels by about 25% to 30%, it is still an improvement.
Collier's report noted that despite China's reopening, local consumption will remain a key driver for Hong Kong's retail market in the next 12 months.
The changing shopping habits of Mainlanders over the past three years could be indicative of a new attitude towards retail markets. This could have significant implications for businesses operating in this space.
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Colliers predicts that Grade A office rents will rebound by 3% this year, due to strong demand from Chinese and overseas companies.
Jeong said that even though Hong Kong's office market has a high vacancy rate of 14.7%, it is still a desirable location for businesses. He noted that the city's infrastructure and proximity to other markets make it an attractive option for companies looking to expand their operations.
"But it's not the end of the world because, compared with other peer cities, 8% to 10% is a generally reasonable number," she added.
Hong Kong's home prices fell sharply in October, reaching a five-year low, as interest rates rose and borrowing costs increased. This trend is likely to continue in the coming months, as affordability remains a major challenge for many buyers in Hong Kong.
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Jeong said that the result was a "softening of investment demand," but that the demand from homebuyers still exists.
Homebuyers are taking advantage of the softening housing market by snatching up cheaper flats. This is a great time to buy a home, as prices are lower than they have been in recent years. If you're in the market for a new home, now is a great time to take advantage of the current market conditions.
In 2023, I think the interest rate will continue to go up. We are looking at stabilization at least in the second half of this year.
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Hong Kong raised interest rates by 50 basis points to 4.75% last month, following the U.S. Federal Reserve. This move was widely expected by analysts and investors, who have been closely watching the Fed's actions in recent months.
Jeong said that high borrowing costs will dampen demand in the residential market, and that a "negative 5% to 10% downward adjustment" should be expected this year.